The current financial transaction payment system is undergoing change in response to developments in information technology. Software and information media providers are seeking aggressively to disintermediate banks from their traditional customers. New entrants are more often than not non-banks with different regulatory constraints that purport to offer less costly infrastructures that are proposed to provide traditional banking services. The software and media industries seek to integrate the movement of information with the movement of money. It is an objective of the invention to preserve banks as a focus of payment transactions and to create a bank-centric link between information and payments. Fulfilling this objective, the invention allows banks to capitalize on their traditional position in payment systems and to lead in commerce in the introduction of new payment infrastructures. The invention allows banks to continue to focus on core competencies such as preservation and development of existing customer relationships, expansion of market presence and expertise in risk management, while growing the role banks play in providing value added transactional information.
The invention provides a bank-centric system that leads in electronic commerce initiatives, that develops value added information services, and that ensures soundness in new and existing payment systems. To fulfill these objectives, the invention establishes a framework that enables banks to continue to perform the critical role of trust, to lead migration to the virtual world, to create innovative value added information services, and to set the foundation for new real time payment transaction systems.
The invention provides an electronic commerce trust system as a new real-time payment infrastructure (ECTS) that integrates payment functions with information, offers multiple and secure access through public and private networks, and has a capability to utilize a wide range of access mechanisms, including smart-cards, ATM's, kiosks, TV set-tops, hand-held devices, personal computers and other network access devices. The payment system ensures that the information supporting a financial transaction is controlled by the principal parties to the purchasing process: the buyer, the seller and their respective financial institutions. The electronic commerce trust system of the invention encourages adoption of electronic payments by setting standards and certifying hardware and software components and ensures interoperability while maintaining the soundness of the payments infrastructure. As a result, banks can focus on providing value added services and will expand their customer relationships from that of a facilitator of payment transactions to that of a provider of value-added information as a transaction intermediary.
Currently about 85% of all consumer transactions in the United States are based on paper, a further 13% involve consumer use of paper and plastic. According to the Institute for the Future, the transition to electronic payments for consumers will be steady for the next decade. The share (in volume) of payments made by cash or check is expected to decline from 85% today to about 60% in 2005. At the same time, the share of payments made electronically is forecast to rise from about 2% today to about 18% by 2005. Id.
Payments for regular monthly bills that account for around 60% of all checks written are expected to migrate to some form of credit card or electronic payment. Ibid. In addition, consumer and corporate customer preference for credit cards, debit cards and emerging E-cash systems are projected to take over as much as 13% of cash payments. The use of smart cards is similarly expected to expand as government units such as states and counties begin to use smart cards as a mechanism for benefit payments.
Within this perspective, financial institutions, merchants and corporations have made substantial past investments in building and in maintaining existing payments infrastructures that position banks at the center of the transfer of payment value. This present infrastructure, which was costly to develop and is expensive to maintain, may inhibit financial institutions from developing new media and information distribution channels that may threaten to render the past investment obsolete.
While traditional financial institutions support the evolution of payment mechanisms, opportunities for new electronic payment and information services are also being taken up by non-financial institutions, including telecommunications companies, technology providers and other non-banks. If banks' traditional roles diminish in the absence of new bank-centric infrastructure development, bank revenues for value-added and basic services will continue to decline--while simultaneously--the risk of the transaction will remain with the banks.
The invention allows banks to continue to play a critical and value-added role in payments systems for a new era, by providing specifications of new technologies and forms of payment transactions that interoperate with other existing and emerging payment systems as customers continue simultaneously to use both old and newly emerging payment mechanisms.
It is the object of the invention to foster the growth and development of electronic banking in an open environment that will encourage greater choices in banking software, access devices, and the development of more efficient processing capabilities for the benefit of bank customers. Further objectives are to accelerate the establishment of new electronic payment and product delivery systems by facilitating the development of interoperable specifications and standards; to create through a certification process for providers of banking products an environment for a safe and secure electronic infrastructure that will enhance bank brands and safeguard consumer privacy; to enhance consumer confidence by way of a standardized and unique acceptance or certification mark; and to evaluate the feasibility of industry-driven payment certification and real-time transactions or settlement. The invention will improve access to banking services for the largest number of people, enhance and support bank brands, and serve as a benchmark infrastructure for bank-centric electronic transaction information delivery systems and electronic payment systems.
The system of the invention is described more fully by reference to the following description of the preferred embodiment considered with the drawings in which: